I’m 22 and started working full-time about 6 months ago after graduating last spring. I have an SDR role at a small tech startup, but my employer doesn’t offer a 401k.
I just opened a Roth IRA with Fidelity and will start investing there, but I’m wondering if there’s any way to get similar tax benefits to a 401k without having access to one? What’s the best way to invest the money I would’ve contributed if my company had a retirement plan?
An IRA is the closest thing to a 401k when it comes to tax benefits. Gains and dividends grow tax-free, just like a 401k. If you want to defer income tax until withdrawal, you’d need to go with a traditional IRA instead of a Roth.
The biggest downside is the contribution limit is much lower than a 401k, but otherwise, it works similarly.
Opening a Roth IRA was a great move. If you can max out your contributions, that’s a solid start. You can still contribute for 2024 if you haven’t already maxed that out.
Once you hit the limit, you can invest in a taxable brokerage account. While it doesn’t come with tax benefits, there are no penalties if you ever need to withdraw money before retirement, which can be useful if you plan to retire early or need flexibility.
Good job getting started with the Roth IRA. That should be your priority since it gives you tax-free growth.
Will you have more than $7,000 to invest for retirement? If so, you may want to look into other options like a taxable brokerage account.
@Unclewaffl3s
I’ll probably be able to put away between $7,000 and $10,000. I make $50k base plus commission, and aside from rent and student loans, I don’t have a lot of expenses. When my lease is up, I’ll likely move back in with my parents, so I’ll be able to save even more.
If you have a high-deductible health plan, look into opening a Health Savings Account (HSA) with Fidelity. It’s triple tax-advantaged: contributions are pre-tax, it grows tax-free, and withdrawals for medical expenses are also tax-free. It can act like another retirement account if you don’t need to use it right away.